Benefits of Fluctuating Exchange Rates on the Investor’s Wealth
We consider a problem of maximizing the utility of an agent who invests in a stock and a money market account incorporating proportional transaction costs λ>0 and foreign exchange rate fluctuations. Assuming a HARA utility function Uc=cp/p for all c≥0, p<1, p≠0, we suggest an approach of deter...
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| Format: | Article |
| Language: | English |
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Wiley
2022-01-01
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| Series: | Journal of Applied Mathematics |
| Online Access: | http://dx.doi.org/10.1155/2022/5595610 |
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| _version_ | 1849397854679859200 |
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| author | Obonye Doctor Edward M. Lungu |
| author_facet | Obonye Doctor Edward M. Lungu |
| author_sort | Obonye Doctor |
| collection | DOAJ |
| description | We consider a problem of maximizing the utility of an agent who invests in a stock and a money market account incorporating proportional transaction costs λ>0 and foreign exchange rate fluctuations. Assuming a HARA utility function Uc=cp/p for all c≥0, p<1, p≠0, we suggest an approach of determining the value function. Contrary to fears associated with exchange rate fluctuations, our results show that these fluctuations can bring about tangible benefits in one’s wealth. We quantify the level of these benefits. We also present an example which illustrates an investment strategy of our agent. |
| format | Article |
| id | doaj-art-a71ca5e751214e80954e3eafdc96c86e |
| institution | Kabale University |
| issn | 1687-0042 |
| language | English |
| publishDate | 2022-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Applied Mathematics |
| spelling | doaj-art-a71ca5e751214e80954e3eafdc96c86e2025-08-20T03:38:49ZengWileyJournal of Applied Mathematics1687-00422022-01-01202210.1155/2022/5595610Benefits of Fluctuating Exchange Rates on the Investor’s WealthObonye Doctor0Edward M. Lungu1Department of Mathematics and Statistical SciencesDepartment of Mathematics and Statistical SciencesWe consider a problem of maximizing the utility of an agent who invests in a stock and a money market account incorporating proportional transaction costs λ>0 and foreign exchange rate fluctuations. Assuming a HARA utility function Uc=cp/p for all c≥0, p<1, p≠0, we suggest an approach of determining the value function. Contrary to fears associated with exchange rate fluctuations, our results show that these fluctuations can bring about tangible benefits in one’s wealth. We quantify the level of these benefits. We also present an example which illustrates an investment strategy of our agent.http://dx.doi.org/10.1155/2022/5595610 |
| spellingShingle | Obonye Doctor Edward M. Lungu Benefits of Fluctuating Exchange Rates on the Investor’s Wealth Journal of Applied Mathematics |
| title | Benefits of Fluctuating Exchange Rates on the Investor’s Wealth |
| title_full | Benefits of Fluctuating Exchange Rates on the Investor’s Wealth |
| title_fullStr | Benefits of Fluctuating Exchange Rates on the Investor’s Wealth |
| title_full_unstemmed | Benefits of Fluctuating Exchange Rates on the Investor’s Wealth |
| title_short | Benefits of Fluctuating Exchange Rates on the Investor’s Wealth |
| title_sort | benefits of fluctuating exchange rates on the investor s wealth |
| url | http://dx.doi.org/10.1155/2022/5595610 |
| work_keys_str_mv | AT obonyedoctor benefitsoffluctuatingexchangeratesontheinvestorswealth AT edwardmlungu benefitsoffluctuatingexchangeratesontheinvestorswealth |